'Madhouse economics' and 'irrational nonsense', two phrases I have used many times in speeches on economics (a subject I used to teach in more sensible times). It is with frustration and not pleasure that I think recent events have proved me right.
'Globalisation', 'privatisation', 'liberalisation' are all components of the utterly misguided and dangerous economic strategy called 'neo-liberalism', which I vowed to oppose in my maiden speech in Parliament eleven years ago. The world has been teetering on the brink of financial catastrophe in recent days, all because our political leaders became fundamentalist believers in this economic dogma.
It all started several decades ago with a book written by a man called Friedrich von Hayek, a potty obsessive who believed that such things as our National Health Service, nationalised railways and progressive taxation - where the rich pay most - were all somehow grotesque assaults on his notion of freedom. He believed that the free market should be given its head and governments take a back seat with no role in - for example - seeking to maintain jobs and full employment. Yes, he was crazy, but he had his disciples, most notably Milton Freidman, the (in)famous American economist. His ideas were picked up in turn by British Conservative politicians, such as the late Keith Joseph and then - of course - Margaret Thatcher. Astonishingly, Tony Blair followed in her footsteps, together with top politicians in countries across the world including the European Union.
The neo-liberal strategy has now come crashing down, with the most right wing US President in history taking gigantic steps to the left in a series of nationalisations as the American government has taken over some of the biggest financial institutions in the world. In Britain too we have seen Northern Rock and Bradford & Bingley go the same way, and the crisis is far from over.
It could all have been so different. In the 1970s the Labour Party conference voted to nationalise the banks and financial institutions. Had that happened, Britain would have been protected because the banks would have been accountable to Parliament and the greedy cowboy gamblers who have been running our banks would not have been given house room.
When I was elected to Parliament I also joined the All Party Building Societies Parliamentary Group, to campaign against the 'demutualization' of our building societies. Real building societies have just depositors and borrowers, with no shareholders, but some of the big building societies bribed their members- effectively with their own money - to vote to sell their building societies to private shareholders. All of those societies who in effect became private banks have failed. They have either been forced into mergers with other big banks or been nationalised. My views have been proved right, but, as I say, I take no pleasure in that.
The reality is that uncontrolled free market capitalism leads to instability and inequality. Capitalism can only be made to work at all when it is regulated and controlled by government on behalf of the people, and with a substantial degree of state ownership. Had the energy sector still been in public ownership, we would not have seen the private energy corporations now ripping off the public with big price rises and big profits. And those railways still in public ownership on the Continent of Europe are infinitely better than our own privatised, fragmented and expensive railways.
So how do we know that such a regulated world works better? Simply because it has been tried and shown to work. Between 1945 and 1970, with a few minor ups and downs, we saw the fastest rise in living standards in our history, with full employment too. Now is the time to restore the common sense policies of those years.
Kelvin Hopkins MP
